The Economy

Can Donald Trump Be Wall Street’s Most Unlikely Savior?

Six years after Dodd-Frank, Wall Street is ensnarled in a miasma of crippling regulation that is stifling not only its own bottom line, but the fortunes of ordinary Americans, too. Can Donald Trump become its surprising hero?

On February 3, Donald Trump convened a long-awaited, and not entirely un-controversial, meeting of his high-powered Strategy and Policy Forum in the State Dining Room of the White House. It had been a wild first two weeks in the White House—a fortnight replete with Trump’s botched immigration executive order, protests at airports across the country, “alternative facts,” and the world’s introduction to the delights of Sean Spicer. Uber’s co-founder and C.E.O., Travis Kalanick, had pulled out of the meeting the previous day under pressure from his customers, among others. Perhaps sensitive to the dissension, or simply giddy to see so many people who once shunned him now kiss his ring, Trump demonstrated his more genial side. To Stephen A. Schwarzman, the billionaire co-founder, chairman, and C.E.O. of the Blackstone Group, he said, “You have done, as usual, an amazing job.” To Larry Fink, the billionaire co-founder, chairman, and C.E.O. of BlackRock, the huge asset-management firm, he said, “Larry did a great job for me. He managed a lot of my money, and I have to tell you, he got me great returns last year.” To Jamie Dimon, the demi-billionaire chairman, president, and C.E.O. of JPMorganChase & Co., who was rumored to be a top contender for the secretary of the Treasury, Trump said, “There’s nobody better to tell me about Dodd-Frank than Jamie, so you’re going to tell me about it.”

Perhaps even greater than flattery, Trump turned his attention to that very issue which many of the money people at the table cared most about—Dodd-Frank, the controversial and sprawling financial re-regulation law, passed in 2010, that aims to ward off another financial crisis. “We expect to be cutting a lot out of Dodd-Frank,” Trump continued, “because, frankly, I have so many people, friends of mine that have nice businesses that can’t borrow money, they just can’t get any money because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank.” After the meeting, Trump returned to the Oval Office where he signed an executive order signaling his intention to repeal many of the financial regulations that were imposed on the banking sector in the wake of the 2008 financial crisis, including much of Dodd-Frank. Just off Trump’s left shoulder, grinning ear to ear, was Gary Cohn, formerly the president and C.O.O. of Goldman Sachs, now the director of the National Economic Council. Also lurking around the White House were other Goldman alumni, including Stephen Bannon, Trump’s chief strategist, and Steven Mnuchin, his soon-to-be-confirmed Treasury secretary.

Unsurprisingly, Trump’s shenanigans that day lit up Sen. Elizabeth Warren, one of his fiercest critics on the left. “Donald Trump talked a big game about Wall Street during his campaign—but as President, we’re finding out whose side he’s really on,” she wrote in a statement on Facebook. “Today, after literally standing alongside big bank and hedge fund C.E.O.s, he announced two new orders—one that will make it easier for investment advisors to cheat you out of your retirement savings, and another that will put two former Goldman Sachs executives in charge of gutting the rules that protect you from financial fraud and another economic meltdown. The Wall Street bankers and lobbyists whose greed and recklessness nearly destroyed this country may be toasting each other with champagne, but the American people have not forgotten the 2008 financial crisis—and they will not forget what happened today.”

For much of the past eight years, Washington has delighted in punishing Wall Street for its role in exacerbating the 2008 financial crisis by layering on thousands of pages of rules and regulations that govern everything from how much capital a bank must keep to how they advertise. (You can almost imagine Washington politicians and regulators deciding how many bankers should be allowed to go to the bathroom at the same time.) On the one hand, many politicians’ desire for retribution is understandable. After all, there was plenty of evidence that the big Wall Street banks knowingly packaged up shoddy mortgages—mortgages that should never have been issued in the first place—into securities, got them rated AAA (even though they weren’t), and sold them off as high-quality investments all around the world (again, even though they weren’t).

But on the other hand, these regulations have become a byzantine mess—one that would be comical were it not for the fact that they were impinging on the livelihoods of the very Americans, on Main Street, they were purportedly designed to protect. Owing to Washington’s zealous compliance policies, according to a senior Wall Street executive, the job of nearly one out of every five people working on Wall Street these days is to watch what four other people do all day long. Washington’s financial regulators now help themselves to meetings with a bank’s board of directors. Bank regulators now pass judgment on everything from the wisdom of an individual loan to how much capital a bank must have and how it uses it. On account of regulatory requirements, the bond market is now shockingly illiquid, costing tens of millions of Americans with 401Ks and pensions every time they, or their fiduciaries, try to buy or sell a bond. Home mortgages have become increasingly difficult to get, unless of course you don’t need or don’t want one.

According to Davis Polk, the Wall Street law firm, the new regulations governing the banking system run to more than 22,000 pages of new rules, that’s on top of the 848 pages of the Dodd-Frank law—all of which is still in the process of being decoded, let alone understood, in the more than six years since the law was passed. Another 20 percent of the regulations mandated by Dodd-Frank still have not been written. According to Federal Financial Analytics Inc., the six largest U.S. banks by assets spent $70.2 billion in 2013 on regulatory compliance, nearly double what they collectively spent in 2007—and that is on top of the more than $200 billion in fines and penalties that federal and state prosecutors, as well as regulators, have extracted from shareholders of Wall Street banks for their role in causing the financial crisis. Of course, bankers, traders, and executives also should have been held accountable for their bad behavior in the years leading up to the financial crisis. But that is a task for the Justice Department, not politicians and regulators. (The fact that Obama’s Justice Department failed miserably in that assignment is a discussion for another day.)

Wall Street has always played the essential role as the left ventricle of capitalism. For centuries, back to our nation’s founding, businesspeople looking for access to capital have turned to Wall Street bankers to provide it, at a fair price, to allow them to start or to grow their businesses. For the longest time, its interstitial role was always tempered by the fact that the Wall Street firms themselves were always small, private partnerships where individual partners had their own money at risk, as well as their entire net worth, if something went wrong. And things went wrong quite often. The history of Wall Street is littered with the names of firms that once seemed invincible but soon found themselves on the junk heap of history. Bear Stearns and Lehman Brothers are but the most recent examples.

This fashion of doing business—one in which partners took prudent risks with their own capital out of fear that a partner could do something foolish and wipe out the firm—began to erode in 1970. Back then, the highly respected firm, Donaldson, Lufkin & Jenrette, decided to flout New York Stock Exchange rules and sell equity in its firm to the public through an initial public offering. The N.Y.S.E. ultimately changed the rules for D.L.J., and Wall Street would never be the same. In the past half century, one Wall Street firm after another tapped the public markets as a source of cheap capital to grow their businesses and to reward long-serving partners with many millions of dollars when they sold their ownership stakes. The process reached its apotheosis, in May 1999, when Goldman Sachs went public in a highflying I.P.O. that was many times oversubscribed, despite being priced at four times Goldman’s book value.

As a result of these I.P.O.s, Wall Street had access to lots of other people’s money. But the incentives on Wall Street also changed completely. Whereas partners were once encouraged to take prudent risks, after the D.L.J. I.P.O. bankers, traders and executives were rewarded for taking big risks with other people’s money. Lost in the process was any sense of accountability for bad behavior. The new calculus on Wall Street rewarded bankers hugely, with multi-million-dollar bonuses, for generating revenue—and, crucially, it did not penalize them when things went terribly wrong. Indeed, the changed incentive system on Wall Street has resulted in one financial crisis after another, with the big kahuna coming in spectacular fashion in September 2008.

But just as Wall Street excess has gone too far the past two or so decades, so too did Washington’s retribution of Wall Street for the role it played in helping to cause the crisis in the first place. What we need now, as the country comes to terms with a maniac in the White House who seems determined to give Wall Street the keys to the candy store, is a clear-eyed understanding of what Wall Street does well, what Wall Street does wrong, and, invaluably, what must be changed as part of any deal that the nutty dealmaker in chief makes with the members of his business advisory council.

Moreover, we need to have a fact-based debate about the role Wall Street plays—and must continue to be permitted to play—in getting our economy moving again. The American banking system, once the envy of the world, must be allowed to succeed in its essential task of providing capital to those who need it to innovate, to start new businesses, to build new plants and equipment, and to hire employees at respectable, and increasing, wages. Banks must be allowed to take prudent risks and earn rewards for taking them.

The new compliance culture that regulators have imposed on the banking system has thrown sand in the engine of what was once a brilliant machine for allocating capital. And the American people are paying a heavy price for it: an economy that is mired in a low-growth, low-inflation, low-wage mode. Larry Summers, the Harvard economist and former Treasury secretary, refers to this lamentable state of affairs as the “secular stagnation” of an economy “stuck in neutral,” barely able to generate annual G.D.P. growth of more than 2 percent. (Real G.D.P. in the fourth quarter of 2016 rose at an anemic annual rate of 1.9 percent.) “The reality is that if American growth continues to have a 2 percent ceiling, it is doubtful that we will achieve any of our major national objectives,” Summers wrote in a 2016 Financial Times column. His consistent prescription has been the somewhat vague idea of creating “more demand for the product of business.”

Donald Trump is a bewildering narcissist who poses enormous threats to our economy, national security, and dignity. He has called Mexicans “rapists”; he was recorded saying he could grab women “by the pussy”; he is a serially bankrupt businessman, whose West Wing resembles a B-list reality show. And he has stacked the Cabinet of his supposedly populist administration with former Goldman Sachs executives. But whether it’s his own intuition, or the advice of his advisers and friends (despite their staggering wealth, no one feels picked on more than Wall Street guys), Trump—as painful as it is for me to say it—is right about Wall Street. He is correct to try to abandon the retributive policies and regulations that have gummed up the gears of the banking system since 2010 and replace them with those that allow banks to provide the fuel for the economy’s growth.

The truth is, just as Trump signaled he would do on February 3, there needs to be an intelligent, well-considered reform of the onerous provisions of Dodd-Frank. That does not mean a wholesale junking of the law. It means that some of the law should be preserved, such as the provisions that mandate capital requirements and that complex derivatives be traded on exchanges. And it also means that any changes to Dodd-Frank should be part of a grand bargain with Wall Street that requires that the financial services industry reform its outdated incentive system to make key bankers, traders, and executives once again accountable for their behavior, just as they were in the olden days of the partnership era. It’s a fair trade, and one that Trump should demand.

Trump’s rich buddies will obviously benefit from less restrictive regulations and find a way to get even richer than they already are. But so will the American people. Dodd-Frank and its Volcker Rule, which bans proprietary trading at Wall Street banks, have been especially punitive toward smaller financial institutions. Marshall Lux and Robert Greene, at the Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government, have argued that Dodd-Frank’s regulatory requirements are sinking many community banks. The two scholars found that while community banks (those with less than $10 billion in assets) accounted for 22 percent of outstanding bank loans, they accounted for more than 75 percent of agricultural loans and half of small-business loans.

The truth is that it is still difficult for small businesses, which create the majority of new jobs in this country, to get loans, or for prospective homeowners to get mortgages or to refinance existing mortgages, primarily due to more stringent capital and credit requirements. And as growing income equality has made the need for lending to small and local businesses an imperative, community banks are playing less of a role than they had previously in extending credit, taking deposits, and facilitating commerce. Most top bank executives have seemed too terrified to speak out on the topic, given that federal and state regulators control their bank charters. But Robert Wilmers, the C.E.O. of Buffalo’s M&T Bank, has not been. “A restoration of those crucial roles will require a healthier dialogue between bankers and regulators, an appreciation of the unintended consequences of new policies, a grasp of the implications of technological change, and an understanding of the rapidly evolving financial services industry as a whole,” he wrote his shareholders in 2016. “Though small and mid-sized banks played little, if any, role in the crisis, they have been swept into this vast change, and the resulting disproportionate burden is distracting them from their traditional focus on servicing local families, businesses and farmers. Despite a shared objective of maintaining the safety and soundness of the financial system, today’s banking environment is typified by a relationship between institutions and governing agencies that is less than collaborative—a product, it seems, of a political atmosphere where pressure remains upon banks to prove themselves reformed.”

Regulators and central bankers have also taken their toll on the big Wall Street banks that have historically made sure the capital markets function properly. Compliance officers are everywhere these days. According to its own public disclosure, JPMorganChase hired 8,000 of them in 2015; out of a workforce of 236,000, 43,000 are now involved in compliance functions, nearly double the number from 2011. Goldman Sachs increased its employee count in 2015, to 36,800 from 34,000, many of whom it has said were compliance officers. Regulators are everywhere, too. Whereas it was rare for a Washington regulator to make an appearance inside a Wall Street bank before the financial crisis (the so-called “light touch” approach), now, as one Wall Street senior executive told me, “people are seeing regulators constantly.”

Since Morgan Stanley became a bank-holding company in the midst of the 2008 financial crisis, regulators are crawling all over the place. On-site federal examiners from both the Federal Reserve and the Office of Comptroller of the Currency have their own offices at Morgan Stanley. “They can go wherever they want, whenever they want,” explained Ruth Porat, the former Morgan Stanley chief financial officer, in an interview with me before she took the same job at Alphabet, Google’s parent company. They can go to board meetings. They can look at and monitor the loan portfolio. They examine every leveraged loan. They are looking at credit decisions regularly. She tried to put the best face on the new reality. “It’s made us a better firm,” she said. “It’s made us more predictable.”

Dimon, however, has been far less diplomatic. In what may have been a thin-skinned joke, he said Wall Street is “under assault” from regulators. “In the old days, you dealt with one regulator,” he said in a conversation with investors. “Now it’s five or six. It makes it very difficult and very complicated. You all should ask the question how American that is.”

New regulations have also curtailed what was once an essential function of Wall Street and taken for granted: providing liquidity to the nearly $40 trillion bond market, making it possible for clients to sell large bond portfolios to Wall Street without such sales moving the market price dramatically one way or another. Now, Wall Street is abandoning that business, in the wake of regulators forcing Wall Street banks to allocate more of their precious capital against bonds warehoused on their balance sheets. Instead of tying up capital this way, Wall Street increasingly is no longer making markets in bonds.

This may seem like an esoteric, irrelevant development. But people who own bonds in a brokerage account, in a 401K, or a pension—in other words, more than 85 million Americans—now have a much more difficult time selling them when they want to or need to. The securitization market has also been curtailed in the wake of the financial crisis, making mortgages more expensive, if you can get one, as well as car loans.

Then there is the sad recent saga of three-month L.I.B.O.R., or the London Interbank Offered Rate. Why you should care is that L.I.B.O.R. is the rate that is used to price nearly every loan around the world. It is also the rate that banks use to lend each other money. In the last two years, the cost of three-month L.I.B.O.R. has quadrupled in price. The rapid move upward in L.I.B.O.R. comes in reaction to new regulations that went into effect in late 2016 in the money-market fund industry. It is an ominous sign that banks are starting to charge each other so much more for short-term loans, and it stands in stark contrast to the new highs being achieved daily in the stock market. But it also mirrors the general sell-off that has occurred in Treasury securities since Trump’s election.

Once upon a time, Alan Greenspan, a former Federal Reserve board chairman, spoke about the Fed being an organization that sets monetary policy with a minor regulatory function attached to it. Today, the Fed’s monetary function is the minor appendage to its growing regulatory juggernaut. Not for nothing has The Wall Street Journal called Daniel Tarullo, a senior member of the Board of Governors at the Federal Reserve, the “most important person in the banking business” for the power he holds over how banks operate. He has been responsible for many of the new regulations designed to make sure that Wall Street eliminates risk-taking and never again causes a financial crisis.

That’s fine if the American people still believe that punishing Wall Street will somehow benefit them. The reality is far different: the sooner that Wall Street and community banks are permitted to return to their traditional role of taking capital from those who have it and providing it to those who want and need it, free of onerous, punitive regulations, will be the moment that the power of the American economy is again unleashed. Until then, our economy will indeed be stuck in neutral. And if Donald Trump is the person who can accomplish this, good for him.

Things may be looking up, though, for the American people. The acting head of the Securities and Exchange Commission has said he would freeze the Dodd-Frank-related rule-making process ahead of the expected confirmation of Jay Clayton, a Wall Street lawyer and Trump’s choice to be the new chairman of the S.E.C. And, on February 10, Tarullo announced his resignation, effective in April, some five years before his term was scheduled to end. Tarullo’s sudden departure gives Trump the opportunity to appoint a replacement for him who, hopefully, will propose smarter regulations, those that will encourage Wall Street to take prudent risks, and to be held accountable for its actions, not just punish it for the wrongdoing that occurred a decade ago.

The domestic doyenne, known primarily for teaching a whole class of homemakers the virtues of a perfectly-timed soufflé or a perfectly-folded sheet, imperfectly found herself in the Big House for five months in 2004, after she was convicted for conspiracy and obstruction of justice related to selling shares of drugmaker ImClone Systems.

The so-called “pharma-bro” created a national media frenzy when he hiked the price of a lifesaving drug by 5,000 percent overnight in 2015, and continued to fan the flames by buying a $2 million single-copy Wu-Tang Clan album and picking fights with presidential candidates. In the midst of the firestorm, he also got arrested and charged with 8 counts of fraud after prosecutors accusing him of using a public drug company he ran as a personal piggybank to pay back investors whose money he lost at his now-defunct hedge funds.

Photo: Photo-Illustration by Ben Park; From Getty Images (Shkreli).

BERNIE MADOFF

The name Bernie Madoff has become synonymous with reprehensible greed after the Wall Street fraudster was caught stealing his victims’ fortunes to live like a king. Madoff was sentenced to 150 years in prison—the maximum for his crimes—after pleading guilty to 11 counts of myriad financial crimes related to a Ponzi scheme that swallowed up $10 billion of investors’ money.

Photo: Photo-Illustration by Ben Park; From Getty Images (Madoff).

ALLEN STANFORD

In the early 2000s, Allen Stanford was enjoying the spoils of a $7 billion Ponzi scheme—a knighthood awarded by Antigua, a handful of yachts, $2 billion to his name, and a cricket team of his very own. But the international fraud empire he built over the course of two decades, in which he offered phony high-interest certificates of deposit at a bank he started in Antigua, imploded. He was charged with 13 counts of wire and mail fraud, conspiracy, and money laundering and sentenced to 110 years in prison without parole.

Photo: Photo-Illustration by Ben Park; From Getty Images (Stanford).

MATHEW MARTOMA

Over the course of several days in July of 2008, Mathew Martoma sealed his fate. That was when the former S.A.C. Capital portfolio manager allegedly used inside information about a clinical trial for Alzheimer’s drugs to bring in a windfall for his firm. Martoma was one of about 85 individuals who were either convicted of or pleaded guilty in the ensuing investigation that rocked Wall Street, though Martoma’s 9-year sentence was on the harsher side. A judge ruled that he also had to forfeit nearly $9.5 million in bonuses he received while working at S.A.C. in 2008, including the Boca Raton home he bought for $2 million.

Photo: Photo-Illustration by Ben Park; From Splash News (Martoma).

SAGE KELLY

By Wall Street standards, Sage Kelly had it all: a cushy, $7 million-a-year gig running Jefferies’s health-care investment-banking unit, a home in Sag Harbor, a growing family, and a group of buddies to pal around with. But it all came crashing down when his wife filed for divorce, alleging in court papers that they had engaged in a foursome with clients and that he would often take so many drugs that he would pee all over their home. Jefferies denied all of the allegations and Kelly’s wife later recanted the statements, but the banker found himself out of a job for two years.

Photo: Photo-Illustration by Ben Park; From Splash News (Kelly).

BRUNO IKSIL

Bruno Iksil earned himself the moniker the “London Whale” for a $6.2 billion trading loss he made on J.P. Morgan’s ledger in 2012. The Frenchman, who contends that his risky trades were made at the behest of his superiors, avoided any sort of prosecution. But the bank was subject to government probes and $900 million in regulatory fines, and its C.E.O., Jamie Dimon, took a 50 percent pay cut.

Photo: Photo-Illustration by Ben Park; From Getty Images (Iksil).

MARTHA STEWART

The domestic doyenne, known primarily for teaching a whole class of homemakers the virtues of a perfectly-timed soufflé or a perfectly-folded sheet, imperfectly found herself in the Big House for five months in 2004, after she was convicted for conspiracy and obstruction of justice related to selling shares of drugmaker ImClone Systems.

Photo-Illustration by Ben Park; From NBC/Getty Images (Stewart).

MARTIN SHKRELI

The so-called “pharma-bro” created a national media frenzy when he hiked the price of a lifesaving drug by 5,000 percent overnight in 2015, and continued to fan the flames by buying a $2 million single-copy Wu-Tang Clan album and picking fights with presidential candidates. In the midst of the firestorm, he also got arrested and charged with 8 counts of fraud after prosecutors accusing him of using a public drug company he ran as a personal piggybank to pay back investors whose money he lost at his now-defunct hedge funds.

Photo-Illustration by Ben Park; From Getty Images (Shkreli).

BERNIE MADOFF

The name Bernie Madoff has become synonymous with reprehensible greed after the Wall Street fraudster was caught stealing his victims’ fortunes to live like a king. Madoff was sentenced to 150 years in prison—the maximum for his crimes—after pleading guilty to 11 counts of myriad financial crimes related to a Ponzi scheme that swallowed up $10 billion of investors’ money.

Photo-Illustration by Ben Park; From Getty Images (Madoff).

ALLEN STANFORD

In the early 2000s, Allen Stanford was enjoying the spoils of a $7 billion Ponzi scheme—a knighthood awarded by Antigua, a handful of yachts, $2 billion to his name, and a cricket team of his very own. But the international fraud empire he built over the course of two decades, in which he offered phony high-interest certificates of deposit at a bank he started in Antigua, imploded. He was charged with 13 counts of wire and mail fraud, conspiracy, and money laundering and sentenced to 110 years in prison without parole.

Photo-Illustration by Ben Park; From Getty Images (Stanford).

STEVE COHEN

If he is not number one, Steve Cohen is pretty close to being considered the luckiest man on Wall Street. While federal investigators circled Cohen and his firm, S.A.C. Capital, for nearly a decade, only his employees were convicted of wrongdoing, while Cohen was never nailed. His firm pleaded guilty to insider trading and forker over a record $1.8 billion fine, but all Cohen got was a two-year ban on managing outside money—a most gentle slap on the wrist from the S.E.C. while he happily manages his family office and prepares for his next steps in the hedge fund world.

Photo-Illustration by Ben Park; From Getty Images (Cohen).

RAJ RAJARATNAM

Raj Rajaratnam was a frugal billionaire of sorts—opting to fly commercial and flouting the fancy art and high-end collectables that many of his fellow hedge fund managers favored. But he was also keen on skirting the law, a court found. Rajaratnam was charged with trading on inside information in 2009 and convicted on 14 counts of conspiracy and securities fraud in case considered to be one of the biggest prosecutorial wins in white collar criminal history. He is currently serving out his 11 years in the main prison at the Federal Medical Center at Devens in Ayer, Massachusetts.

Photo-Illustration by Ben Park; From Getty Images (Rajaratnam).

MICHAEL MILKEN

That billionaire Michael Milken, the high-flying junk bond king of Beverly Hills, found himself sobbing in front of a courtroom in 1990 as he was sentenced to 10 years in prison, surely felt like a cruel twist of fate. That he ended up there because another convicted fraudster, Ivan Boesky, traded his name as part of his insider trading charges, surely felt even crueler. Milken was originally charged with 98 counts of racketeering, securities fraud, and mail fraud, though he pleaded guilty to just six counts of conspiracy and fraud related to illegal securities trading. He was ordered to pay $600 million in fines.

Photo-Illustration by Ben Park; From Getty Images (Milken).

JEFFREY SKILLING

Jeffrey Skilling was the chief executive of Enron when the energy-trading giant crumbled under the weight of its accounting schemes, which hid the scope of its financial woes and stripped billions of dollars from shareholders and employees. He was initially sentenced to 24 years in prison—a punishment that was later reduced to 14 years and a $42 fine. He reportedly spent his time behind bars tutoring in Spanish and reading the newspaper to a blind inmate each day.

Photo-Illustration by Ben Park; From Getty Images (Skilling).

R. FOSTER WINANS

A scheme that netted less than $1 million in profits and resulted in an 18-month jail sentence is hardly the sexiest on this list, but the transgression is perhaps the most unusual. Former Wall Street Jornal columnist R. Foster Winans admitted that in the early 1980s, he would slip Peter Brand information about a stock he would be featuring in his column, “Heard on the Street”—the contents of which would often move markets. Brant would make trades based on the early information, and Winans would receive a kickback in kind.

Photo-Illustration by Ben Park; From Getty Images (Winans).

MATHEW MARTOMA

Over the course of several days in July of 2008, Mathew Martoma sealed his fate. That was when the former S.A.C. Capital portfolio manager allegedly used inside information about a clinical trial for Alzheimer’s drugs to bring in a windfall for his firm. Martoma was one of about 85 individuals who were either convicted of or pleaded guilty in the ensuing investigation that rocked Wall Street, though Martoma’s 9-year sentence was on the harsher side. A judge ruled that he also had to forfeit nearly $9.5 million in bonuses he received while working at S.A.C. in 2008, including the Boca Raton home he bought for $2 million.

Photo-Illustration by Ben Park; From Splash News (Martoma).

SAGE KELLY

By Wall Street standards, Sage Kelly had it all: a cushy, $7 million-a-year gig running Jefferies’s health-care investment-banking unit, a home in Sag Harbor, a growing family, and a group of buddies to pal around with. But it all came crashing down when his wife filed for divorce, alleging in court papers that they had engaged in a foursome with clients and that he would often take so many drugs that he would pee all over their home. Jefferies denied all of the allegations and Kelly’s wife later recanted the statements, but the banker found himself out of a job for two years.

Photo-Illustration by Ben Park; From Splash News (Kelly).

BRUNO IKSIL

Bruno Iksil earned himself the moniker the “London Whale” for a $6.2 billion trading loss he made on J.P. Morgan’s ledger in 2012. The Frenchman, who contends that his risky trades were made at the behest of his superiors, avoided any sort of prosecution. But the bank was subject to government probes and $900 million in regulatory fines, and its C.E.O., Jamie Dimon, took a 50 percent pay cut.